• Ezra to hold 67% post listing
• Strategic focus on SEUs but plans to grow
• Fair value estimate of S$0.78
Engin and fab solutions provider with strategic focus
With two yards in Vietnam and a fabrication facility in the US, Triyards Holdings Ltd (Triyards) is an engineering and fabrication solutions provider focused on the offshore oil and gas industry. Unlike many shipyards, the group has a strategic focus on the construction of selfelevating, self-propelled accommodation and construction units (liftboats), having established a significant track record. Triyards also has the capability to build technologically advanced construction vessels (OSCVs) and offshore support vessels (OSVs).
Backing from the Ezra Group
Triyards originated from Ezra Holdings – the first of the two Vietnam yards was acquired by Ezra from SEAMER Holdings Ltd in 2005, the second yard was set up in 2007 and the third (Houston yard) acquired in 2010. After the listing of Triyards, Ezra will hold about 67.0% of the former. Close links between both companies mean that Triyards may be able to be involved in some of the projects that Ezra undertakes and tap into Ezra’s clientele base.
Plans to expand product range and upgrade capabilities, amongst others
Looking ahead, Triyards plans to focus on complex and sophisticated liftboats, OSCVs and OSVs while
building up in-house engineering capabilities to commission its own designs of self-elevating units. The group also intends to diversify into new products and penetrate new markets, amongst other initiatives.
Fair value estimate of S$0.78
Sentiment in the offshore and marine sector has been buoyed by the QE3 announcement from the US Fed. We retain our positive view on the broader sector as oil prices are expected to sustain capital expenditure. Related stocks are trading at about 12x FY12F earnings and 11x FY13F earnings. As Triyards is likely to be a small-mid cap stock upon listing, we use a PER of 9x (based on FY13F earnings), resulting in a fair value estimate of S$0.78. We do not have a rating on Triyards.
Section A: Brief business overview
Engineering & fabrication solutions provider…
With two yards in Vietnam and a fabrication facility in the US, Triyards Holdings Ltd (Triyards) is an engineering and fabrication solutions provider focused on the offshore oil and gas industry.
Services provided by the company include:
- vessel design and building services such as engineering, construction, and/or conversion
- fabrication and assembly of jack-ups, offshore platforms, jackets and steel structures, and topsides
- vessel and rig repair and overhaul services and installation
- design and/or fabrication of offshore equipment including specialised heavy lift cranes, winches, A-frames
… with a strategic focus on self-elevating units
Unlike many shipyards, the group has a strategic focus on the construction of self-elevating, self-propelled accommodation and construction units (henceforth called self-elevating units, SEUs in this report), having established a significant track record.
Able to build advanced OSCVs and OSVs
Triyards also has the capability to build technologically advanced construction vessels (OSCVs) and offshore support vessels (OSVs). The group is currently building the Lewek Constellation, an ice-class, deepwater multi-lay vessel with 3,000 MT heavy-lift capability that is among the most advanced construction and pipelay vessels globally in its class.
Section B: Properties and facilities
Three yards – two in Vietnam, one in the US
As the name suggests, Triyards has three yards. Two are in Vietnam (Ho Chi Minh City and Vung Tau), while the third is in Houston, US.
The first Vietnam yard, SSY, is located at Thanh My Loi Ward, District 2, in Ho Chi Minh City. It was acquired as a wholly-owned subsidiary by the Ezra Group in 2005 from SEAMER Holdings Ltd for US$5.5m, following which the yard underwent extensive upgrading which was completed in 2009. In 2007, SSY was contracted to build its first SEU for Levingston, who would go on to order more units.
The second yard, SOFEL, was set up in 2007 at the Dong Xuyen Industrial Park, about 120km away from SSY. Its strategic location in Vung Tau, Vietnam’s offshore marine cluster, provides proximity to the oil majors in South Vietnam as well as the logistical benefit of direct access to the South China Sea. The yard has undergone two major phases of development.
In 2010, the Houston yard was acquired from the trustee for Goodcrane Corporation, an unrelated third party in distressed bankruptcy proceedings.
Section C: Some ado about SEUs
Regional market leader in SEU construction
Unlike many shipyards, the group has a strategic focus on the construction of self-elevating units (SEUs). We believe that Triyards has a leading market position in SE Asia for the construction of such units, and our checks reveal that there are indeed hardly any yards in the region that can match Triyards’ track record in this aspect – the group has so far delivered six SEUs over the past four years, with an additional newly-designed unit (suitable for deeper waters) that is under construction.
What is an SEU and what is so good about it?
SEUs are self-propelled, self-elevating offshore working platforms with a large open deck space, jack-up legs, cranes and living quarters. It can perform a range of services, including production platform construction, inspection/repair/maintenance (IRM) and decommissioning, well stimulation, intervention and workover, well plugging and abandonment, pipeline installation and IRM services and dive support operations.
Unlike alternatives such as jack-up rigs and construction barges, SEUs can reposition themselves at an offshore site or move to another location without the requirement for third party assistance.
Though an SEU is currently more costly than a construction barge, the former provides a much more stable platform as its legs are firmly grounded on the seabed. An SEU typically costs around US$50-60m/unit, but the newer series that is under construction at Triyards may cost around US$80-90m/unit.
Where are SEUs used today?
SEUs are commonly known as liftboats in the North American market, which is the place of origination of such units. Originally used in areas like the Gulf of Mexico, Singapore-based company Ezion Holdings was quick to introduce such units to Asia and the Middle East to capitalise on the growing demand in these regions.
Historically, the SEU has been confined to the US Gulf of Mexico (GoM) where its largely shallow waters and relatively benign conditions have provided an ideal working environment for such units. But this also means that assets which have been specifically designed for use in the GoM generally fail to meet the more demanding requirements of the international market (e.g. harsher conditions and deeper waters in the North Sea)
. … but now gaining traction
Recent market growth has been observed outside the US GoM, specifically in West Africa, the Middle East, Europe and SE Asia. Not surprisingly, the size and complexity of SEUs has also increased significantly over the last fifty years. According to Infield Systems, older assets were typically capable of operating in 10-20m of water with a deck load of around 50 metric tons, while more modern ones can operate in over 60m of water with a deck load in excess of 700 metric tons. The six units that have been delivered by Triyards can operate in water depth of about 65m, which are relatively rare in the world today
Section D: Recent results and outlook
Earnings rebound in 1HFY12 from FY11
Triyards reported a 267.5% YoY rise in revenue to US$115.3m in 1HFY12, mainly due to the commencement of the construction of the Lewek Constellation during that period. There were eight vessels under construction including Lewek Constellation in 1HFY12 compared to four vessels in 1HFY11. This brought net profit to US$14.5m in 1HFY12 compared to a net loss of US$1.1m in 1HFY11. The level of net profit in 1HFY12 has already surpassed the full year amount in FY09 and FY11, and is about half of that seen in FY10.
FY12 to be a strong year, 70% of FY13F backed as well
Given the earnings rebound in 1HFY12, we expect FY12 to be a strong year for Triyards. We are forecasting revenue of US$112m and net profit of US$9.7m for 2HFY12; bringing full year revenue and net profit to US$231.2m and US$24.2m, respectively. We are forecasting revenue of US$252.9m in FY13, of which US$178m of it is backed by the current order book and the remaining based on new order wins of US$150m in the year (assuming Triyards clinches two SEU contracts or one SEU contract and two large OSV contracts).
Estimate net order of US$267m as of Aug 2012
Triyards has an order book with a total contract value of about US$613.1m as of 24 Aug 2012, which the group expects to deliver between 2012 and 2014. This gross figure comprises five vessels, as shown in Exhibit 10. Subtracting the cost of about US$425m for the Lewek Constellation and US$77m for the SEU, this leaves US$111.1m for the 16,000BHP AHTS and two PSVs. Based on the contract values and delivery schedules, we estimate a net order book of about US$267m as of Aug 2012 (i.e. end FY12) with deliveries till 2014. We expect US$178m of this to be recognized in FY13 and US$89m in FY14.
Backing from the Ezra Group
After the listing of Triyards, Ezra will hold about 67.0% of the former. Close links between both companies mean that Triyards may be able to be involved in some of the projects that Ezra undertakes and tap into Ezra’s clientele base.
Plans to expand product range and upgrade capabilities, amongst others
Looking ahead, Triyards plans to focus on complex and sophisticated liftboats, OSCVs and OSVs while building up in-house engineering capabilities to commission its own designs of self-elevating units. The group also intends to diversify into new products and penetrate new markets, amongst other initiatives.
Section E: Peer Comparison
Fair value estimate of S$0.78 Sentiment in the offshore and marine sector has recently been buoyed by the QE3 announcement from the US Fed. We still hold a positive view on the broader sector as oil prices are expected to sustain capital expenditure in the sector. Related stocks are trading at about 12x FY12F earnings and 11x FY13F earnings (Exhibit 11). As Triyards is likely to be a small-mid cap stock upon listing, we use a PER of 9x (based on FY13F earnings), resulting in a fair value estimate of S$0.78.
We do not have a rating on Triyards.
No comments:
Post a Comment